-
Key Points
According to the latest research on stablecoins, Tether (CRYPTO: USDT) and USDC (CRYPTO: USDC) account for a whopping 90% of the value of the global stablecoin market. So, if you're choosing between these two stablecoins, it likely comes down to a choice of Tether vs. USDC.
But which one to pick? There are several key factors to keep in mind when buying stablecoins. Let's take a closer look.
Stablecoins are not investments
First of all, it's important not to view either Tether or USDC as typical investments. Both trade for exactly $1, and 30 years from now, both will trade for exactly $1. That's what makes them stablecoins.
Stablecoins are pegged 1:1 to the value of the U.S. dollar and are designed to be used as "digital dollars." Thus, from a pure investment perspective, there's no clear-cut reason to choose between Tether and USDC.
Which stablecoin has greater utility for investors?
For many investors, the choice boils down to "utility," or how these stablecoins can be used to accomplish tasks in the blockchain and crypto world.
For example, if you're a high-frequency crypto trader, rapidly swapping into and out of various cryptocurrencies, you might prefer Tether. It offers greater liquidity than USDC, and hence, less "wiggle" around the dollar peg. Over time, your trading costs might be lower with Tether.
If you're a long-term buy-and-hold investor, that likely does not matter. Instead, you might be interested in yield. Think of stablecoins as digital dollars that can be invested in yield-bearing protocols on the blockchain. For instance, if you're a Coinbase Global (NASDAQ: COIN) customer, you can earn 3.85% on your USDC held on the trading platform. Coinbase offers a 0% yield on Tether, encouraging customers to hold USDC instead. Given that Coinbase has a strategic partnership with Circle Internet Group (NYSE: CRCL), the issuer of USDC, this makes sense.
Another factor is the ease of using your stablecoins for everyday purchases. USDC has an advantage over Tether for U.S. users. Coinbase rolled out a new "pay with USDC" solution for online merchants, encouraging acceptance of USDC at the point of sale. An early test case was Shopify (NASDAQ: SHOP), which announced a deal with Coinbase.
Not all stablecoins are created alike
It's worth considering stablecoins from a regulatory and legal perspective. USDC offers greater transparency than Tether. Circle provides weekly updates and monthly attestation reports on USDC, while Tether offers only quarterly updates.
Moreover, Circle provides superior backing for its USDC stablecoin. To maintain a dollar peg at all times, a stablecoin must be backed by cash or cash equivalents. In the past, Tether has been less rigorous in defining "cash equivalents," including commercial paper and other cryptocurrencies. Tether has also faced issues with U.S. regulators and New York State authorities for misstating its reserves' value.
If peace of mind is important to you, USDC is the clear pick. Institutional investors also prefer USDC due to regulatory compliance. USDC is issued by a U.S.-based company and is fully compliant with the Genius Act, which regulates stablecoins. In contrast, Tether is issued by an offshore company and is not yet fully compliant with the Genius Act.
And the winner is...
Considering the aforementioned factors, the clear winner is USDC. It offers greater utility for U.S.-based investors and provides more transparency with less regulatory risk. If you're looking to convert physical dollars into digital dollars, then USDC deserves a closer look.
Should you buy stock in USDC right now?
Before you buy stock in USDC, consider this:
The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to buy now, and USDC wasn’t one of them. The 10 stocks on their list have the potential for significant returns in the coming years.
This article has been published in fool.com via Yahoo News.
